Why Did Lincoln Electric’s Debt Surge 200% in 2015?



Lincoln’s debt surged 200% in 2015

As shown in the chart below, the company is a low-leveraged entity. Lincoln Electric (LECO) has been successful in keeping a low debt-to-equity ratio. This shows the company is using less leverage and has a strong equity position.

In 2015, debt increased by 200% as compared to 2014. This was due to issuances of $350 million in unsecured notes. Debt to total invested capital increased to 27.6% in 2015 from 5.2% in 2014.

LECO continues to expand globally and is in constant search for deals that may involve significant investments. In 2016, the company expects its capex to be ~$65 million–$75 million.

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In 2015, LECO had $481 million in long-term debt against equity of $931 million, implying a debt-to-equity ratio of ~0.52x. Cash increased by 9% primarily due to an increase in cash from operating activities as well as the issuance of senior unsecured notes. In 2015, cash stood at $304 million. For 2014, the debt-to-equity ratio was 0.13x while cash stood at $278 million.

Debt due in 2016

According to LECO’s 2015 annual report, the company’s contractual obligations and commitments stand at $153 million in 2016. The aggregate maturities of debt according to credit agreements are $41 million and $37 million toward 2018 and 2020, respectively.

In 2015, LECO amended its credit facility. This step was taken for better financial stability as well as flexibility. It acts as a precaution in the current challenging environment.

ETF investments

LECO is a part of the Robo-Stox Global Robotics and Automation Index ETF (ROBO) and accounts for 2.2% of the fund’s total holdings.

Cognex Corp. (CGNX), Rockwell Automation (ROK), and ABB Ltd. (ABB) are also among the top ten holdings of the fund. They account for 2.2%, 2.1%, and 2.0% of the fund, respectively. LECO is also part of the iShares S&P 1500 Index ETF (ITOT).


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